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Unveiling the Connection among ESG, Earnings Management, and Financial Distress: Insights from an Emerging Market by Wadhaah Ibrahim Almubarak; Kaouther Chebbi; Mohammed Abdullah Ammer is a Environmental Science article available to read on EtoBox.

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Earnings management continues to be a critical ethical concern faced by companies. The management that conducts earnings manipulation may adopt environmental, social, and governance (ESG) activities to safeguard themselves from stakeholders. Engagement in ESG is sometimes viewed as a type of managerial misconduct and as a means to cover up manipulative practices. Thus, the key aim of our study is to investigate the association between ESG disclosure and earnings management levels in the context of listed companies in Saudi Arabia. We also investigate the influence of financial distress on the above association. Data were obtained from 304 company-year observations for the years 2014–2021. The results showed that ESG disclosure had a positive and statistically significant effect on earnings management. In addition, financial distress significantly and positively enhanced this effect. This shows that financially distressed companies tend to disclose more ESG practices and engage in earnings management. Moreover, through the division of the three ESG components—environmental, social, and governance—the impacts of both environmental and social factors on earnings management were found

Who reads Unveiling the Connection among ESG, Earnings Management, and Financial Distress: Insights from an Emerging Market?

Author

Wadhaah Ibrahim Almubarak; Kaouther Chebbi; Mohammed Abdullah Ammer

Publisher

MDPI AG

Published

2023

Language

EN

Field

Environmental Science (Social Sciences)